APP ASSESSMENT ON ITS LINK WITH INDUSTRIAL
FOREST PLANTATIONS IN INDONESIAEXECUTIVE SUMMARYBACKGROUND
Responding to calls from stakeholders in 2012, we carried out an independent assessment to clarify
APP’s link with pulpwood suppliers in Indonesia. This was completed in 2014. In June 2018, APP took on
the initiative to commence the second assessment with an expansion of scope. The second assessment
was completed in March 2019.

OBJECTIVE
The main objective of the exercise is to demonstrate APP’s zero deforestation commitment through:• Ensuring that APP’s supply chain is deforestation-free• Ensuring that APP’s shareholders, Board of Directors (BOD), Board of Commissioners (BOC) andemployees of APP are not involved in deforestation.
• Providing clarity on APP’s governance and corporate structure

SCOPE
1. APP Companies

No1
2
3
4
5
6
78

Company Names
PT AraraAbadi
PT Wirakarya Sakti
PT Sumalindo Hutani Jaya
PT FinnnantaraIntiga
PT Riau Andalan Lestari
PT Satria Perkasa Agung
PT. Indah Kiat Pulp & Paper Tbk
PT. Lontar Papyrus Pulp & Paper
IndustryPulpwood Supplier(ForestryOperation)xxxxxxPulp
Mill/IntegratedPulp & Paper Millxx

PaperMill9101112

PT. OKI Pulp & Paper Mills
PT. PabrikKertas Tjiwi Kimia Tbk
PT. Pindo Deli Pulp and Paper Mills
PT. Ekamas FortunaXX
X

13PT. The Univenus

Xx

2. The Association of Indonesia Forest Concession Holders (AsosiasiPengusahaHutan
Indonesia(APHI), http://www.rimbawan.com/daftar-anggota-aphi/) website statesthat there are
192 plantation companies (HTIs) across 23 provinces in Indonesia (valid for the period of 2016 –2021).
However, as of July 2018,only 188 HTIs were listed on the website, hence these 188 HTIsarereferenced as the basis for this exercise.

METHODOLOGYTo ensure that the exercise is robust, there were two approaches applied simultaneously:Ø Approach 1: To identify links between APP and other plantation companies in Indonesia throughshareholding, key management and employment
The approach is applied to all APP companies through the following:
1.1 A comparison was conducted between the shareholders, BOD and BOC of the HTI companies
listed on the APHI website against the list of employees and shareholders of APPcompanies.
1.2 Identification of conflict of interestthrough the e-Kinship program, which is an internalmechanism within APP to allow the employees to declare any potential conflict of interest tothe company. This is including, but not limited to any family relations with APP’s competitors
or suppliers and/or ownership or involvement in other businesses similar to APP’s line ofbusiness.
Ø Approach 2: Determination of links through financial transaction
All APP companies that either supply or purchase pulpwood with forestry operations and pulp orintegrated pulp & paper mills, were assessed throughidentification of significant financialtransactions between APP companies againstthe 188 HTI companies from the APHI website.
Ø The relationships of Plantation Companies to APP Companies are categorized into:
1. Partners: Plantation Companies where APP Companies have Significant Influence*
2. Third Party Suppliers: Plantation Companies where APP Companies do not have Significant
Influence*
3. No Existing Relationship: Plantation Companies that have neither transactions nor anyagreement with APP Companies

*Significant Influence means that any of the following relationships exist with the APP Companies inrelation to wood supply:
a. Long-term supply relationships for purchasing or selling woodb. Outstanding balance of advance payment related to wood transactions
c. Non-economic supply of fixed assets in the location of Plantation Companies (for individual
asset amount greater than Rp 500 million)d. Supply of services related to wood transactions (greater than Rp 500 million)e. Unusual trading relationships related to wood transactions
f. Same shareholder(s)g. Same key management personnel, i.e., Board of Directors (BOD) and Board of Commissioners(BOC)Ø These exercises involved the following parties:
1. One of the Big Four, the identity of this institution will not be made public due to a nondisclosure agreement, obtained sampling data based on Approach 1 & 2 for verification andtesting purposes. The final report containing factual findings will be presented to APP for its
follow up actions, if any.
2. Earthworm Foundation (EF, previously known as The Forest Trust)provided oversight during thedata collection and subsequently cross references the data by conducting a deforestation trace
when links were found between APP and other HTI companies in Indonesia. EF also provided
recommendationson how to further improve the transparency on APP’s corporate structures,
how to maintain deforestation free supply chain and strengthen the no deforestationcommitment implementation.
Ø The standard and definition of the assessment in this context refers to the Agreed Upon Procedure(AUP) as stated in International Standard on Related Services 4400 issued by The Indonesian Instituteof Certified Public Accountant (adopted from International Federation of Accountants).

RESULTS
1. Database• Of the 192 member companies of APHI website, only 188 companies are listed as HTI.
However, information on 19 Companies was not available in the Ditjen AHU (Direktorat
Jenderal Administrasi Hukum Umum/Directorate General of Law Administration) website,www.ahu.go.id.Meanwhile, 1 company was identified as APP’s competitor. Therefore, theDatabase for Plantation Companies in Indonesia is based on the 168 companies.

Description

TotalCompanies

Members of APHI
List of HTI Companies in APHI
No information in AHU website
APP Competitor
Total workable companies

192
188
191168Remarksout of scopeout of scope

Category of Partnership
PARTNERS
Plantation CompaniesNoNameRelations

NoName1

PT Acacia Andalan Utama

Long term supplier

15 PT Mutiara Sabuk Khatulistiwa
PT Perawang Sukses Perkasa
16Industri

2PT Asia Tani PersadaLong term supplier

3PT Balai Kayang Mandiri

Long term supplier

17 PT Putra Riau Perkasa

4567

PT Bina Daya Bentala
PT Bina Duta Laksana
PT Bukit Batu Hutani AlamPT Bumi Andalas PermaiLong term supplierLong term supplierLong term supplierLong term supplier

18
1920
21

8PT Bumi Mekar Hijau

Long term supplier22910111213
14

PT Bumi Persada PermaiPT Daya Tani Kalbar
PT Kalimantan Subur Permai
PT Kelawit Hutani Lestari
PT Kelawit Wanalestari
PT Mitra Hutani Jaya

Long term supplierLong term supplierLong term supplierLong term supplierLong term supplierLong term supplier

23
24
25
26
27
28

Name

1

KTH Indah Hawa

2
3

KTH Jabung Jaya Bersama
KTH Lubuk Jambi

4

KTH Wana Kapuas LestariLong term supplierSignificant outstanding balanceof other receivable (for carbonproject)Long term supplierLong term supplierLong term supplierLong term supplier

PT Riau Indo AgropalmaPT Rimba Hutani Mas
PT Rimba Mandau Lestari
PT Ruas Utama Jaya
PT Sebangun Bumi Andalas WoodLong term supplier
Industries
PT Sekato Pratama Makmur
Long term supplier
PT Sumber Hijau PermaiLong term supplier
PT Suntara Gajapati
Long term supplier
PT Surya Hutani Jaya
Long term supplier
PT Tebo Multi AgroLong term supplier
PT Tri Pupajaya
Long term supplier

Community Forest

NoRelations
Long term supplier

RelationLong term supply throughconflict resolution schemeLong term supplierLong term supplierLong term supply (but nolonger supply in 2018)

Trader & Chip MillNo

Name1

PT Dexter Timber PerkasaIndonesia

2PT Sarana Bina Semesta AlamRelation
Trader, sources from PTSuntara Gajapati
Chip mill, sources from thefolowing:
PT Acacia Andalan Utama
PT Surya Hutani Jaya
PT Sumalindo Hutani Jaya
PT Kelawit Hutani Lestari
PT Kelawit Wanalestari

THIRD PARTY SUPPLIERS

Explanation on PT Fajar Surya Swadaya
•••••
•

•

A trial shipment of logs occurred after PT Fajar Surya Swadaya (FSS) passed the SERA
desktop assessment, before the SERA onsite assessments were completed.
After further field verification, APP together with EF found there were forest conversion
in FSS’ concession area.
APP found that areas defined by FSS as non HCS were actually HCS areas.
The final report categorized FSS as significant risk not aligned with APP’s commitment.
Therefore, the woods delivered were flagged and quarantined in IKPP’s log yard.
Detail explanation can be found in APP’s Public Announcement in FCP Monitoring
Dashboard(http://www.fcpmonitoring.com/Pages/updatecontent_details.aspx?nid=200082)
The Accounting Firm noted there is no long time supply agreement between IKPP andFSS.

Explanation on PT Wanakasita Nusantara•An external stakeholder (NGO) raised an issue on the possible link between PT Wanakasita
Nusantara (WN) and PT Agronusa Alam Sejahtera (AAS).

•

•
•

APP ran a legality check by downloading the Article of Association of both companies in theDitjen AHU (Direktorat Jenderal Administrasi Hukum Umum/Directorate General of Law
Administration) website, www.ahu.go.id.
The results showed that one of the shareholders of WN is also a shareholder in AAS.
AAS was still involved in natural forest conversion, therefore APP terminated relationshipwith WN who were found to have a link with AAS.

2. Companies with no existing relationship
Other than the companies listed above, the other companies out of the 168 are identified as having
no relations to APP. The following are the samples of those companies, with the ones highlighted in
red being the companies that were questioned by the stakeholders during 2017-2018.

PT Bangun Rimba Sejahtera (BRS)
Through several media reports, it was implied that that APP deliberately kept concessions off
the radar screen for the purposes of flouting our FCP commitments.It is insinuated that APP“plans” to flout our commitment to obtain Free, Prior and Informed Consent (FPIC) from localcommunities.
We had carried out an evaluation of the supplier and understand that BRS has yet to commence
land preparation or planting activity. It is still in the process of engaging the community toobtain FPIC. Approval for BRS was consequently put on hold subject to their FPIC processcompletion.

PT Muara Sungai Landak (MSL)
It is insinuated that MSL is indirectly enabling APP to violate our zero-deforestation pledge.
We conducted an investigation and found that three of MSL’s shareholders had relationships
with APP. Two were ex-employees of APP who left in October 2015 and November 2015 andone was a current employee who had not declared his shareholdings and position within MSL.
This constituted a violation of APP’s Code of Conduct as it presented a direct conflict of interest.
The employee was terminated with immediate effect. APP never received any pulpwood fromthis company.

PT Hutan Rindang Banua (HRB)The Company is under the Golden Energy Resources (GEAR), and accused of deforestation
practices. HRB is not supplying wood to APP, and their response to the allegation can be seen
through their website at: http://www.gear.com.sg/csr

PT Buana Megatama Jaya (BMJ)
Stakeholders’ concern through the report released by the Anti Mafia Coalition is that BMJ havethe same shareholder with some of APP Partners.
BMJ applied to be APP pulpwood suppliers in 2018 and undergone the SERA process on March2018. They passed the requirement but there is no commercial agreement signed as per end of2018.

PT Silva Rimba Lestari (SRL)An NGO report titled “APP and APRIL violate zero-deforestation policies with wood purchasesfrom Djarum Group concessions in East Kalimantan” raises the concern around wood supply ofPT Sarana Bina Semesta Alam (PT SBSA), which is alleged to have acquired fibre supply from SRL.
Through the assessment, it is confirmed that there is no wood supply from SRL to APP.
Based on our clarification to PT SBSA, they did purchased wood from SRL which was used forinfrastructure purposes.

PT Korintiga Hutani (KTH)
After passing APP Suppliers Evaluation and Risk Assessment Process (SERA) in May 2018, theCompany started supply to APP using a One Time Supplier scheme (short tem contract). Aconcern was raised during this period, stating that the company was still implementing
deforestation practices on a group level in other business. APP responded to the concern byreviewing the supply contract.
Based on the new version of SERA (which was consulted during Stakeholder Advisory Forum 7 in
October 2018) KTH has gone through APP SERA process for Continuous Supply scheme in
November 2018 and meet APP requirements as supplier. Therefore the company started supplyto APP in Q3 2018.

SUMMARY
Based on the procedure performed, it was concluded that:•The companies identified as APP Partners are consistent with the ones we have declared in APP
FCP Monitoring Dashboard (www.fcpmonitoring.com).

•The companies that were identified as involved in deforestation practices are no longer supplyto APP•

Other companies that were alleged to have relationship to APP have been identified as having
no relationship to APP supply chain

NEXT STEPSTo strengthen our Supplier Evaluation & Risk Assessment (SERA) process, we will:
1. Align e-Kinship system to APP sustainability commitment
2. Crosscheck shareholders in our Suppliers Evaluation System
3. Continue to publishnew suppliers’ risk sssessment report